On April 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. Superior Court (2018 Cal. LEXIS 3152) wherein it decided what standard applies, under California law, to determine whether workers should be classified as employees or as independent contractors for purposes of California wage orders (which impose obligations relating to, among other things, minimum wages, maximum hours and required meal and rest breaks). In holding that the wage order’s definition of “employ” must be used to determine independent contractor versus employee status (“employ,” meaning “(a) to exercise control over the wages, hours, or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship”), the Court explained what it means to “suffer or permit” an individual to work:
“in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the ‘ABC’ test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor . . . only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” Id. at 11-12. In other words, the individual is presumed to be an employee unless the employer proves that he or she is not.
In so holding, the California Supreme Court significantly broadened the scope of individuals who will be considered employees for purposes of claims alleging violations of California’s wage orders. Following this decision, employers should exercise extreme caution in classifying individuals as independent contractors unless the elements articulated in Dynamex are clearly satisfied.
If you have any questions regarding the classification of individuals as employees or independent contractors, please contact Kiara W. Gebhart, Esq., or any of the attorneys at Shulman Bastian Friedman & Bui LLP at (949) 340-3400.